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Will the President’s jobs plan work?

September 30, 2011

President Obama is barnstorming the country to promote his American Jobs Act bill with the premise that spending money now will pay off later for the country. According to CU-Boulder economist Jay Kaplan, the president’s claim is based on basic economic principles.

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Audio Script

Sept. 30, 2011

President Obama is barnstorming the country to promote his American Jobs Act bill with the premise that spending money now will pay off later for the country. According to CU-Boulder economist Jay Kaplan, the president’s claim is based on basic economic principles.

CUT 1 “The general economic principle is that the most effective way to create additional economic activity is through government spending rather than tax cuts. So government spending is always going to be more effective in creating jobs. (:14) So to the fact that his job bill addresses some spending on infrastructure, and even extending benefits for the unemployed, that puts money in people’s pockets that they’ll spend.” (:25)

Kaplan says, from a basic economic standpoint, that tax cuts during a recession are not advised. But, he says, the president’s $447 billion jobs package has a tax cut that might work.

CUT 2 “If he’s going to cut taxes the payroll side is a good way to go because everyone who works pays payroll taxes. So it’s much more affective in putting money in the pockets of lower income and working class Americans, then say a Federal income tax cut where the lower class and the middle class don’t pay much of that in comparison to the payroll tax.” (:20)

To help pay for the jobs package the president has proposed eliminating many tax loopholes and write-offs for individuals earning more than $200,000 and families earning more than $250,000. And while Republican leaders have voiced approval of tax breaks and overhauling the tax laws, they still disagree that new spending will help solve the nation’s economic problems.

The president sent the jobs bill to Congress Sept. 12, but so far there has not been a vote on it.